Pelosi, lawmakers call for federal probe on mortgage lenders

House Speaker Nancy Pelosi called on the Justice Department to investigate the nation's largest mortgage lenders on Tuesday, and Maryland joined a growing list of states seeking to halt foreclosures while they probe claims of fraudulent filings.

In a letter to U.S. Attorney General Eric H. Holder Jr., Pelosi and dozens of other Democrats accused the nation's biggest banks of making it difficult for struggling borrowers to get foreclosure relief while the firms routinely evicted them with flawed court papers.

The group said that recent reports of lenders initiating hundreds of thousands of questionable foreclosures "amplify our concerns that systemic problems exist."

The request from Democrats puts pressure on the Obama administration to get more involved on a matter that it so far has said little about publicly. The move is also likely to stoke cries for a broad moratorium on foreclosures across the country.

On Tuesday, the AFL-CIO joined other consumer groups that have called for such an action. Foreclosures across the nation could grind to a halt anyway as more states freeze the process.

Real estate analysts, however, warned that the moratoriums could overwhelm the court system and wreak havoc on the fragile housing market by scaring away potential buyers of foreclosed properties.

The problems now tainting hundreds of thousands of foreclosures came to light last month when Ally Financial - the recipient of a $17 billion federal bailout - suspended evictions in 23 states where a court order is required to seize a property.

Other lenders soon followed suit, acknowledging problems with foreclosure filings, including potentially forged documents and the practice of employing "robo-signers" who signed off on thousands of evictions every month without verifying their accuracy. Flawed paperwork also has shown up in the 27 states, including Virginia and Maryland, where lenders can foreclose without a judge's consent.

Those revelations have triggered a chain of reactions. State officials moved to halt foreclosures. Emboldened attorneys for homeowners are ramping up new court challenges. Some judges have said they will reopen foreclosure cases that were rubber-stamped.

Texas this week became the latest state to issue an industry-wide moratorium on foreclosures and demanded that mortgage companies identify employees who improperly signed off on foreclosures documents.

In a letter to the 27 companies that service mortgage loans in the state, Texas Attorney General Greg Abbott requested information on all foreclosures in which an affidavit that was "robosigned" was used. The state's moratorium will be in place until at least Oct. 15, the deadline Abbot gave for a response.

Connecticut issued a similar freeze on all foreclosures last week. California banned foreclosures by J.P. Morgan and Ally, while Colorado stopped foreclosures by Ally.